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with Jon Dawson

Monthly Archives: February 2015

Nationally home sales declined in January but the pace was higher than a year ago for the fourth straight month, according to the National Association of Realtors®. All major regions experienced declines in January, with the Northeast and West seeing the largest.

Penobscot County saw a slight decline with 122 single family homes sold in January compared to 132 for the same period last year.

The state of Maine, however, overall, showed a brisk increase for the month with 1776 sales compared to last years’ 1660.

Lawrence Yun, NAR chief economist, says the housing market got off to a somewhat disappointing start to begin the year with January closings down throughout the country. “January housing data can be volatile because of seasonal influences, but low housing supply and the ongoing rise in home prices above the pace of inflation appeared to slow sales despite interest rates remaining near historic lows.”

Did you know that not deducting private mortgage insurance (PMI) is one of the top mistakes home owners make on their taxes? You have PMI if you put less than a 20% down payment on your home purchase. The deduction expires with tax year 2014 unless Congress renews it.

Here’s what qualifies you- 1.) you got your loan in 2007 or later; 2.) your mortgage is for your primary residence or second home; and 3.) your adjusted gross income is no more than $109,000. You’ll have to itemize and use Schedule A. If your adjusted gross income is between $100,000 and $109,000, use the worksheet included with Schedule A to figure out how much you get to deduct.

How Much Can You Save?

It depends on how much you’re paying. A good rule of thumb industry experts use: You’ll pay $50 a month in premiums for every $100,000 of financing. For example, if you put 5% down on a $200,000 house, you’ll pay monthly PMI premiums of about $125. Increase your down payment to 10%, and you’ll pay less than $80 a month.

The Best Savings of All: Canceling Your PMI

Although the tax deduction is nice — at least while it lasts — getting rid of PMI altogether is even nicer.

You can cancel your PMI when you have 20% equity in your home. Lenders are required to automatically cancel it once you have 22% equity when the equity is achieved by the reducing the mortgage balance through your payments.

– Jon Dawson

This article provides general information about tax laws and consequences, but shouldn’t be relied on as tax or legal advice applicable to particular transactions or circumstances. Consult a tax pro for such advice; tax laws may vary by jurisdiction.

The U.S. economy grew in the final quarter of 2014, but at a slower pace than prior quarters. Despite the fourth quarter decline there appears to be sufficient economic momentum for the economy to move ahead with increased job creation and increased consumer spending. GDP (gross domestic product) for 2014, over the four quarters, grew by 2.4%.

The historical average annual GDP growth is right around 3 percent. Anything under that mark is considered subpar and anything above robust. The last time GDP grew above 3 percent for the whole year was in 2005. A big positive for economic growth in 2015 is expected in the real estate sector. Much of this growth will be fueled by increased household income, increasing rental rates and a decline in mortgage interest rates.

One year ago the average rate for a conforming FHA loan was 4.2%. Last month that rate was 3.47% and todays mortgage rate has declined to 3.23%. This represents a yearly saving of over $800 for a loan of $150,000.